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CARY, N.C. -- Concerned Pantry Shareholders (CPS), a group led by Houston investment groups JCP Investment Management LLC and Lone Star Value Management LLC, believes all options should be considered regarding ways to boost The Pantry Inc.’s stock.
But the best option could be the formation of a real estate investment trust (REIT), Lone Star Management’s founder and CEO Jeffrey Eberwein told The Street.com.
"We see a lot of real estate value here," he said.
The Cary, N.C.-based operator of 1,537 Kangaroo Express convenience stores certainly has plenty of real estate assets. Creating a REIT containing these assets via an initial public offering (IPO) could provide a better valuation of these assets, Eberwein stated. He cited Getty Realty Corp., owner of the real estate where Getty gas stations are housed, as an example of a successful REIT in the c-store industry.
In addition, proceeds that the parent company would receive from the REIT IPO could pay down debt.
"One knock on The Pantry is that it has too much debt," Eberwein told the news outlet. "We think that if they paid down debt, the company’s [trading] multiple would go up."
The CEO added that convenience industry peers Susser Holdings Corp. and Casey’s General Stores Inc. trade at higher multiples and their stocks have performed well over recent years.
CPS, created on Jan. 23, holds a combined 1.9 percent of The Pantry’s stock. The company’s first action was to propose three new members to The Pantry’s board of directors. The c-store retailer quickly rejected these three candidates, citing a lack of industry experience.
The Pantry subsequently nominated Thomas W. "Tad" Dickson, former CEO of Harris Teeter Supermarkets Inc., to its board of directors instead.
"Tad has significant retail experience in the Southeastern U.S.," The Pantry's CEO Dennis G. Hatchell said during the company’s earnings conference call last week. "We look forward to the guidance he can provide."
CPS has yet to make any statement about Dickson. Shareholders will cast votes regarding board of director nominees during The Pantry’s annual meeting on March 13.